Talking Point  

Mitigation needed for unintended consequences of decarbonisation

Mitigation needed for unintended consequences of decarbonisation
The decarbonisation effort may have unintended consequences, such as increased social disparities and a negative affect on investors’ portfolios. (den-belitsky/Envato Elements)

As the collective effort to decarbonise continues to accelerate, there are likely to be unintended consequences, such as increased social disparities and a negative affect on investors’ portfolios, according to a recent note by Fidelity International.

The firm said while it aimed to pursue efforts to help decarbonise the economy, it would also support the social transitions in the communities that needed it the most through active stewardship.

It added that allowing social imparities and inequities to persist would likely impede climate action and potentially negatively impact individual companies’ prospects, and investors’ portfolios overall.

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The 'just transition' is the principle of mitigating the socio-economic impacts of a green transition on all stakeholders and areas of society. It is about aiming to reduce inequalities that can be intensified by a transition and giving a voice to those most impacted.

In 2023, a Fidelity study on just transition found that 42 per cent of investors interviewed were familiar with the concept, of which 35 per cent had or were developing a dedicated investment strategy focused on a just transition. 

In its note Fidelity said while investors were starting to understand the importance of this concept, the survey indicated the urgency to continue to raise awareness as the societal impact of transitioning to a sustainable economy has to be a central consideration. 

ima.jacksonobot@ft.com